January 2024 - Denver Market Update

A Tale of Appreciation: The Luxury Market Outpaces the Median Price

Over the past five years, central Denver luxury homes (priced at the top fifth of the market) have appreciated faster than the median price. In 2018, the median price of a central Denver home stood at $640,000. Fast forward to today, and that figure has soared to $900,000, representing a remarkable 41% increase. Contrast this with homes in the top fifth of the market, which experienced a 70% surge in appreciation over the same period, beginning in 2018 at $993,000 and now boasting a starting point of $1,689,000.

Driving Forces: New Construction and Supply Dynamics

One key driver behind this discrepancy is the significant new construction among the top 20% priced homes. Last year, 24% of homes sold in this segment were constructed after 2020, a sharp contrast to the mere 1.4% in the rest of the market. The uptick in material costs and construction labor has notably impacted the pricing of these newly built homes, while the scarcity of available in-fill homesites has propelled land costs. However, it's crucial to note that the majority of homes, 76% to be exact, were not new construction. Existing homes still dominate the market, and factors beyond new builds are pivotal in shaping their values.

Interest Rates: A Game-Changer

Interest rates emerge as another influential factor in the divergence of appreciation rates. Since 2022 interest rates began their ascent, luxury homes have witnessed a doubling in their appreciation rate compared to the broader market. Wealthier buyers, equipped with various financing options, have navigated this terrain more adeptly than those reliant solely on mortgages.

Looking Ahead: A Shift in Dynamics

As we anticipate a decline in inflation and interest rates, we project a deceleration in the rate of appreciation for the top 20%. However, the luxury market is poised to continue outpacing the market as a whole. The interplay of construction trends, supply dynamics, and financial landscapes is set to shape the real estate terrain in the coming months.

If you’re considering buying or selling a home above the $1.5M price point this year, let’s strategize together to ensure you leverage the current market conditions.

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January Buyer Tips - If you are considering purchasing a home this year, there is no time like the present.  While we have seen a slight uptick in buyer activity at the start of the new year, there is still less competition now than I expect to see in our typical spring market.  Additionally, if interest rates continue to soften, pent-up demand from buyers is expected to drive home prices up.  Let's strategize on how to get you into the right home, at the right price this year.

January Seller Tips - Zillow just released a Q4 2023 survey showcasing a change in homeowner sentiment.  They found that 21% of homeowners are considering selling their homes within the next three years, marking an increase from 15% a year ago. If you're on the fence or ready to make a move, getting your home show-ready is a great first step.  Here’s a few tips to make sure your home makes the best first impression. If you’ve thought about upgrading to your next home this year, let’s chat.

If you're in the market to buy/sell a home, or you just want to chat about real estate, let’s connect!  I'm happy to share market resources, vendor referrals, or anything else that would be helpful in your journey.

Michelle Fitzgerald
Real Estate Broker, Realtor®

phone: 970.215.8455
email: michelle@michellesellsdenver.com
Instagram: https://www.instagram.com/michelle_sellsdenver/